How money works in the financial world
The Wisdom Of Finance gives a new perspective on one of the world’s most misunderstood professions. Is there really wisdom in finance? Non-finance might argue that financiers are a greedy and reckless bunch of selfish and wealthy people who are reckless and lawless.
Mihir Desai, an asset manager who teaches at Harvard business and law schools describes finance as “wise”, and his book offers an alternative thoughtful graphic explanation of how money works that recognise how perverted the industry can be and argues “there is great value in finance.”
He has a unique way of using literature to explain how money works by citing stories ranging from Jane Austen, The Simpsons and Chaucer to 1988 Hollywood movie “Working Girl”. In 1688, Josef de la Vega described finance as both “the fairest and most deceitful business, the noblest and the most infamous in the world, the finest and most vulgar on earth” an oxymoron. The characterisation of finance as deceitful, notorious and vulgar still rings true even today-, particularly after the 2008 financial crisis.
He argues often financers fails to understand the social context in which they operate and vitally non-financiers do not understand how finance drives our world, as money encapsulates social patterns and values. Many distrust financial markets, as they are thought to be hostile to humanity.
But Desai lucidly writes quite the opposite “Perhaps finance is deeply connected to our humanity, so that we can find out way back to a more noble profession by enlivening the idea of finance through stories that illuminate our lives and our work.”
Desai teaches readers about “Risk” by citing works of philosopher Charles Sanders Peirce and poet Wallace Stevens. He explains “Asset Value” through the biblical parity of servants and their talents and insurance with reference to Jane Austen’s description of marriage strategies.
He also explains leverage by writing about strategies that modern western professional used to achieve their commitments to family, career and friends.
According to Desai’s vision, the principles of finance also provide answers to critical questions in our lives, and surprisingly bankruptcy teaches us how to react to failure, the lessons of mergers apply to marriages and the Capital Asset Pricing Model demonstrates the true value of relationships.
The Wisdom of Finance: Discovering Humanity in the World of Risk and Return By Mihir Desai Profile £12.99/ Houghton Miffin $27